from the rooting-against-your-best-self-interests dept

As we've been discussing, the FCC is cooking up a plan to open up the closed cable set top box to third party competition. As we've also been pointing out, the cable industry has been throwing an absolutely epic hissy fit about this plan, given it would destroy the $21 billion in annual revenues cable operators make off of cable box rental fees. Since it can't just admit this is all about protecting set top rental fees, the cable industry has been pushing an endless wave of editorials in newspapers and websites nationwide, claiming more set top box competition will hurt consumer privacy, increase piracy, harm diversity, and rip the very planet from its orbital axis.

Most of these editorials are being penned by the usual assortment of entertainment industry and telecom hand-wringers, the majority of whom have a vested financial interest in the status quo and as such have been happy to repeat the talking point that the FCC's well-intentioned plan is just a secret plan by "big Tech" (aka Google) to treat the noble and ultra-innovative cable industry unfairly.

Back in March we noted that despite the fact that such rules would obviously help streaming set top vendors, Roku had come out in defense of the cable industry, rather timidly saying it wouldn't be supporting the FCC's plan because it has been trying to secure new, semi-exclusive deals with cable providers:

"We have not been advocating for a rule making in this area at this time,” Tricia Mifsud, a Roku spokeswoman, told IBD. “While we are known for selling streaming players, it is only one area of our business. Customers also access our platform through smart TVs and streaming players that operators deploy."

Roku's opposition to the FCC's plan became a little clearer last week, when Comcast (trying to preempt the FCC's plan), announced it was launching an initiative to let some Comcast customers access cable content via Comcast apps on third party devices. Comcast's partners in this new initiative? Samsung and Roku, who'll be offering the Comcast Xfinity app on smart TVs and streaming devices. And while Comcast's plan is certainly a step in the right direction, Comcast being Comcast you can be fairly certain that there will be caveats when the program launches to ensure the impact to set top box revenue is minimized. Comcast's plan obviously also doesn't impact other pay TV operators, so it doesn't really change things for the overall industry.

Trying to defend the company's self-immolating position, Roku CEO Anothony Wood decided last week to write an editorial over at the Wall Street Journal, breathlessly insisting the FCC's plan would hurt consumers. And, as with every editorial of this type, Google is trotted out as the bogeyman pulling the FCC's strings in a plan to somehow treat cable companies unfairly:

"...With prodding from Google and TiVo, the FCC is proposing new “set-top-box” rules that would force cable companies to make their video services available as an “open” set of streams. In other words, companies like Comcast or DirecTV would be required to provide their video, guide data and encryption for use by other companies who could then create their own hardware and software to deliver cable content. As Google argued in an FCC filing last year, the intent is to “unleash competition in the retail navigation-device market” and drive down costs.

This might seem like a great deal for consumers and companies like mine, but once you start peeling back the layers, the picture changes. The proposed regulation would—as we say in the industry—“decouple the user interface” from the video and data itself. This would allow a company like Google to do to the TV what it did on the Web—build an interface without the “inconvenience” of licensing content or entering into business agreements with content companies such as ABC, FOX, HBO, or video distributors like pay TV operators. The unintended consequences of circumventing these kinds of arrangements are likely to include increased costs for consumers, reduced choices and less innovation."

But if you actually read the FCC's proposal so far (pdf), you'll notice the plan does nothing of the sort. In short, customers will still have to pay their cable provider to access cable content, it will just be delivered to additional hardware platforms -- using copyright protection standards determined by the cable industry. The content can't just be repackaged without cable companies getting compensation. How letting consumers have access to more, better and cheaper methods to access the same content results in "reduced choice and less innovation" is a logical leap that makes no coherent sense whatsoever. Similarly, this repeated claim that this is some secret cabal by Google -- when the quest for clunky cable set top box reform is decades old -- remains a bizarre narrative unsupported by reason. Would Google benefit from open set top boxes? Yes. So would countless other hardware vendors and developers.

Woods also tries to argue that regulation isn't necessary, because we're already seeing innovation in the streaming set top box market:

"Regulating the set-top box is unnecessary in the modern age of Internet streaming. Consumers now have tremendous choice for their TV operating system and interface. Robust competition among companies like Roku, Apple, Amazon and Google is already driving rapid innovation and pushing costs down.

Right, but we're not talking about streaming players and services, we're talking about the traditional cable set top box. You know, the cable boxes that consumers, on average, pay $231 to rent annually (and thousands of dollars for over the life of the hardware) despite most boxes being worth a fraction of that? And while we have seen some innovation in recent years on the set top box front (voice search, marginally less archaic GUIs), by and large the cable box remains a clunky relic of a bygone era and a cornerstone of the cable industry's antiquated and uncompetitive walled garden approach to customer services.

The thing is that if anybody should know better, it's Roku. The company had to file a complaint with the FCC (pdf) after Comcast spent years refusing to let its customers access HBO Go on Roku devices (in order, of course, to push those users toward Comcast's own Xfinity set top boxes and apps). Roku also expressed concerns in net neutrality filings with the FCC that Comcast was using TV Anywhere authentication as yet another way to inhibit Internet video competitors; Roku included:

"A large and powerful MVPD may use this leverage in negotiations with content providers or operators of streaming platforms, ultimately favoring parties that can either afford to pay for the privilege of authentication, or have other business leverage that can be used as a counterweight to discriminatory authentication. Additionally, MVPDs with affiliated ISPs can abuse their power over authentication by choosing to authenticate only their own or affiliated offerings."

Yet here we are, with Roku's CEO now playing kissy face with that same company because they've struck a new deal that will give Roku its own, special advantage in the pay TV market.

It should be noted that Woods wasn't entirely willing to pledge unwavering fealty to Comcast. Nor is his editorial entirely devoid of good points. Though Woods isn't willing to mention his new BFF by name, he does make some vague references to Comcast's decision to give its own content an unfair advantage via usage caps and zero rating:

"...the FCC proposal is distracting from the leading risk to the continued evolution of TV—open and fair broadband Internet access for all consumers. In particular, cable companies often control their customers’ broadband access and can take measures against competing streaming services and devices to give their own streaming services and devices an advantage. FCC regulations banning the discriminatory use of data caps and “zero-rating” schemes that selectively exempt certain content from data limits are far more important to the future of TV than “opening” the cable box.

If broadband Internet services are accessible and affordable to consumers and there is a level playing field for content providers and devices makers, then consumers will benefit from a revolutionized television experience. Let’s not bog down the revolution with an unnecessary government intervention in a dynamic marketplace.

In other words, while Woods is perfectly happy to blow a few kisses to protect his new business relationship with the Philadelphia-based cable giant, he's not willing to entirely sell himself and his company down river by ignoring the problems Comcast is causing on the net neutrality and zero rating fronts. And this is actually the one area I don't disagree with Woods on. With Internet video disrupting traditional cable anyway, it might make more sense for the FCC to focus its efforts on improving broadband competition. And, more specifically, the telecom industry's use of usage caps and zero rating to protect legacy TV from Internet video.

By the FCC's logic however, the glacial pace of cord cutting means that traditional cable and ye olde cable box will still be a dominant force for much of the next decade -- and consumers could still benefit from increased cable set top box competition during that period. The problem is that the cable industry clearly intends to fight this proposal tooth and nail, by dragging the FCC's effort out via lawsuit, and funding a major PR offensive in the hopes of convincing the public the FCC's gone power mad. With so many efforts on its plate (from municipal broadband to new broadband privacy rules), the FCC may have to seriously consider just which battles are truly worth fighting, and which problems, like the cable box, may be resolved organically by the market.

All of that said, it remains more than a little embarrassing that Woods and Roku are so eager to sell their longer-term success -- and the overall viability of the broader streaming industry -- downriver just to snuggle up a little closer to one of the most anti-competitive companies in the television industry.

from the i-got-mine,-thanks dept

As the FCC continues its push to open up the cable set top box market to competition, one of the companies that could benefit the most from such a shift isn't willing to support the initiative. The FCC's plan calls for the cable industry to deliver its existing cable content to third-party hardware, creating a new competitive market and putting an end to the $20 billion in fees consumers pay yearly for often-outdated hardware. But unlike companies like Google and TiVO, Roku isn't supporting the plan, making it clear this week the company doesn't want to upset its friends in the cable industry:

"We have not been advocating for a rule making in this area at this time,” Tricia Mifsud, a Roku spokeswoman, told IBD. “While we are known for selling streaming players, it is only one area of our business. Customers also access our platform through smart TVs and streaming players that operators deploy."

Roku's been partnering with Charter and Time Warner Cable (soon to be merged) on small-scale trials that involve the cable companies giving away a free Roku alongside a skinny bundle of basic channels. In New York City, for example, Time Warner Cable's trial offers the free Roku as a replacement for the cable box, delivering three different skinny promo bundles ranging from $10 to $50. Roku makes it pretty clear it's keeping its mouth shut in the fight over the cable box because it believes these relationships will only flourish:

"In addition to Time Warner Cable, we also have a similar arrangement with Charter where they are buying streaming players to offer in a bundle,” added Roku’s Mifsud. “Overseas, we have partnerships with Sky in several countries and Telstra where we have licensed use of our platform and they have deployed their streaming video services to co-branded streaming players."

Indeed, Roku's already cooking up a hybrid streaming and cable box for use overseas it hopes the soon-to-be fused Time Warner Cable Charter will adopt as well. The problem is that these trials aren't likely to see broader deployment in the States, because execs fear such alternatives will cannibalize their already-struggling traditional cable subscriber bases. Cable operators have a long, proud history of flirting with more innovative, less expensive alternatives only for executives to scrap or hamstring the ideas for fear they might hurt the sacred, legacy TV cash cow.

But, because Roku believes it's first in line for the cable industry's affections, it appears to be backing away from an initiative that would likely be good for the entire sector (investment by Viacom, 21st Century Fox, and UK cable operator Sky might be shaping Roku's thinking as well). After all, why support broader, healthy competition when you believe you've got the inside track? Well, because should the FCC's gambit actually work, Roku (which people forget began as a brain child of Netflix) stands to gain a much larger chunk of this suddenly-open market than it will from remaining mute.

from the crash-the-gatekeepers dept

For years, HBO and Time Warner have refused to give people what they want and offer a standalone streaming video service, because they're afraid of shaking up their cozy, promotion-heavy relationship with the cable industry. Instead, HBO's Go streaming service has been made available on desktops and a growing number of devices, TVs, set tops and game consoles -- provided you log in with your traditional cable subscriber information. It's a half-measure, and availability to this day remains a little fractured.

Case in point: Sony this week finally made HBO Go available on the Playstation 3 (despite HBO Go launching in early 2010), but not the new Playstation 4. The new Playstation 3 version works for most cable operators in the country -- except for users on Comcast. Why not? Comcast doesn't really give an answer other than to say the massive (and soon to get much larger) company only has so many people available to ensure TV Everywhere authentication works on new devices:

"With every new website, device or player we authenticate, we need to work through technical integration and customer service which takes time and resources. Moving forward, we will continue to prioritize as we partner with various players."

Which might almost sound like a reasonable explanation -- until you realize that HBO Go on Roku hasn't worked for Comcast users since 2011, despite Roku being one of the most prominent Internet streaming devices available. Apparently, it's a matter of priorities? Comcast's argument for being allowed to acquire companies is always that these acquisitions make them bigger and more efficient. So apparently, getting simple TV authentication to work takes Comcast years longer than every other pay TV operator because Comcast is simply too big, efficient and fantastic?

Now, Playstation 3 users have joined the Roku user chorus, asking Comcast in their official forums why they can't use HBO Go, and are being greeted by the same silence Roku owners have enjoyed for years. I'm not sure you can get away with calling this a net neutrality violation (I think the term is mutated to the point of uselessness anyway), given HBO Go on Roku will work if you have Comcast broadband -- but get HBO from another pay TV provider like Dish. Still, it's fairly curious how Comcast's own Internet video and on-demand offerings (which include HBO content) tend to take priority.

The problem illustrates once again how the TV Industry's "TV Everywhere" mindset fails because it winds up taking value away from the user, not delivering it. It's also another shining example of how HBO should shake off its fears, embrace innovation, leapfrog the gatekeepers and release the standalone Internet streaming app everyone has been clamoring for.

from the customers-are-the-enemy dept

When I started reading CNet's write-up of Roku's new Netflix set-top box, I was beginning to think that the movie industry might finally be getting its act together. The price ($99) seemed reasonable, and the subscription rate (as little as $8.99/month) seemed about right. After years of missteps, I thought, maybe they were finally starting to figure out this Internet thing. Then I read this sentence: "Thanks to Hollywood's byzantine licensing system, less than 10 percent of Netflix's 100,000-plus library of titles is available for streaming to the Player." Even worse, only two of Netflix's 100 most popular movies are available for streaming. It's almost as if Hollywood doesn't want its customers' business.

Apparently, three other manufacturers, including LG, are working on competing set-top boxes. They should be careful not to put all of their eggs in the Netflix basket, given that Netflix may or may not succeed in getting the studios to release more of their titles. And as we've said before, the last thing the video streaming market needs is yet another pointless standards battle. What's needed is an open platform that supports free and paid downloads from a variety of different sources. Some of the Netflix boxes will reportedly include DVD or Blu-Ray drives, which is a smart move. Device makers should also be exploring more open content-delivery options, either in conjunction with existing video sites like YouTube, or developing a new, open platform where anyone can share their videos. In the long run, a lot of video business models will likely involve giving away free content, and a company that provides the set-top boxes for delivering that free content is likely to make a bunch of money. That market will grow especially fast if Hollywood continues its campaign to make its content as difficult to purchase as possible.